Taxes and Fees to Expect When Buying a Car

March 24, 2017.

Buying a car often ends up being hundreds of dollars more expensive than the sticker price due to government and dealership taxes and fees. Dealerships often employ business managers with the goal of getting you to pay for as many dealership fees and services as possible. Be aware and ask ahead of time of all the fees you can expect. Here are some of them and what you should know about them beforehand.

Vehicle Registration Fees:This is a fee that is typically dependent on the price of the car. Depending on where you live you may be able to pay this at the dealership or you will have a grace period to go and pay it at your DMV or Registry

Sales Tax:This fee is typically collected by the dealership and can vary dramatically from county to county and city to city. Look up the sales tax for your local municipality to see if you should be driving a few more miles to save hundreds.Rebates offered by car manufacturers are also typically taxed, check with your local municipality. Also, if you are trading in your car, check if your state taxes on the whole value of the new car or just the difference of the new car value minus the trade-in value.

Documentation Fees:Commonly known as a “doc fee”, this is the cost of preparing and filing all the paperwork. This fee is regulated in some states so it is best to ask early on in the buying process or even just call ahead to know for sure the exact amount this will be. Be aware that this fee is typically subject to sales tax.

Dealer Fees:Some dealers write other fees into the contract and give them official-sounding names: “S&H” or “Dealer Prep” or even “Shipping.” Find out early what fees you will be charged and negotiate accordingly. Before you sign the contract, ensure that no additional dealer fees have been added.

Dealer preparation:New cars should be ready to drive when they arrive from the factory. All they really need are to have the fluids and tires checked – that and a quick car wash before you’re handed the keys. Therefore, the dealer is trying to charge you hundreds for a minimal amount of labor.

Delivery charge:This fee had traditionally been charged to cover the cost of getting a new car from the factory to your local dealership. Not an unreasonable charge, but some dealers charge a delivery fee above-and-beyond the destination charge. Know exactly what each fee the dealer charges is for.

Advertising fee:This fee helps automakers pay for advertising and is usually part of the invoice price. Beware some dealers that try to get customers to pay it twice by listing it again as a separate fee.

Vehicle identification number etching: A good idea as an anti-theft measure but typically will not cost more than $25 with a DIY kit or free at your local police department.

Fabric protection. A protection that modern fabrics don’t need and really no different than what a can of Scotchgard can do.

Paint protection. Another protection that today’s paint does not need. If you are nervous about chips then opt for a good wax detail or protection film offered at detail shops.